An Uber problem for taxi patrons

An Uber problem for taxi patrons

Uber services, including the premium limousine-like Uber Black and the normal taxi-like Uber X, were declared illegal in Thailand by the Department of Land Transport at the end of November. The Uber Company had been using improperly registered public vehicles for Uber X services. Moreover, both Uber Black and Uber X’s drivers do not hold the required public vehicle driver’s licences. The department’s order is, therefore, valid since such services are in violation of vehicle-use provisions of the Motor Vehicle Act.

The taxi regulatory framework in Thailand regulates several aspects of taxi service provision —vehicles, drivers, service quality and prices. Taxis must be registered as public vehicles with yellow licence plates. In addition, the drivers have to hold public vehicle driver’s licences and are prohibited from rejecting passengers in normal circumstances. Taxis must also use meters approved by the Department of Land Transport to calculate fares, and operate in certain permitted areas, such as within a province.

In the case of Uber Black, despite using registered public vehicles, the company has improperly utilised the cars with green licence plates. Green plates are meant for special business services, such as airport limousines or hotel limousines. With the green licence plates, the company can freely set its own fare structure.

Because Uber Black operates as a taxi service and not a special business service, the service is unlawful. Such is not the case with other application-based taxi-hailing services operated in Thailand. The application-based service operators —GrabTaxi and Easy Taxi —use properly registered public vehicles and charge fares based on the approved meter with 20 baht on top of the fares for their booking services, all of which are in compliance with the regulations.

Taxi regulation is necessary to ensure passengers’ safety, quality of service, and effectiveness of the public transport system. It has to correspond with changes in urban development, such as land use changes and new real estate development, as well as with other public transport development.

In other countries, especially in Europe, there is a restriction on the number of taxis, in addition to price and service regulations. Limiting quantity aims to balance supply and demand, resulting in a better service and higher safety. Additionally, many countries have different regulations applied to different types of taxis, which are defined by their characteristics of services. In many major cities in Europe, taxis are categorised into two types. The first type — hackney taxis —can pick up passengers on the street without pre-booking. On the contrary, the second type, called dispatched taxis, can pick up passengers only on a pre-booked basis.

In Thailand, the regulatory framework tends to focus mainly on regulating fares while neglecting innovative services. As a result, there were 18,465 service-related customer complaints made via the department’s hotline during the eight-month period from October 2013 to May 2014, equal to approximately 77 complaints a day.

The number of service complaints is directly correlated with the number of taxis, which was once regulated in Thailand before the use of metered taxis in 1992. However, there have not been any studies to indicate whether the number of taxis in Bangkok is too high or too low. As the urban area is expanding, the number of taxis might already be optimal.

Nevertheless, the cabs might not be properly distributed in all areas. To solve this issue, the government has chosen to rely on market mechanisms and let taxi drivers individually manage themselves. Another major setback includes Thailand’s erratic law enforcement, as seen from the existence of illegal public vans with black licence plates, for example.

What has not existed in the Thai taxi system is the systematic taxi management of a service operated by a company hiring drivers, of a telephone-based booking system so that taxi drivers do not have to wait for passengers somewhere without generating income, and of the use of information technology to increase the effectiveness of taxi-service system. The fares of such services require price flexibility so they can promptly correspond with various demands. For instance, the fare may be higher during rush hours or high demands and lower during off-peak time.

Albeit Uber’s services being illegal, the services actually provide alternatives to taxi customers. In fact, under today’s regulatory framework, this will not be problematic if the company can meet three conditions.

First, all Uber X vehicles must be registered as public-transport cars. Furthermore, all of the company’s drivers must obtain public-transport driver’s licences. Finally, the fares must be set to comply with the department’s regulations.

Using the approved fares, however, the company might not be able to develop customised services, to create any promotional discounts to encourage using rate, or to build customer loyalty.

To offer more choices to public-transport passengers as well as to improve the taxi services, the questions are therefore whether Uber services should be legalised, and if so, how they should be regulated.

If the government decides to legalise the services, it does not mean the company will receive a special treatment or privilege to operate. Thailand has not systematically given a company licence to any taxi firms. Thus, it is time the government has to deliberate over the current regulatory framework and enhance its comprehensiveness in order to develop the taxi system and increase the social welfare.

As long as the Department of Land Transport cannot guarantee that the existing taxi service has high quality and can well serve the demands of Bangkok’s commuters, the prohibition on Uber services is just an act of law enforcement. As a result of its order, people in Bangkok will end up neither having an additional option for taxi services, nor benefiting from price and quality competition in the industry.

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Sumet Ongkittikul is Director for Transport and Logistics Policy at the Thailand Development Research Institute.Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.